Currently the majority of Internet-based commercial transactions are conducted using credit card charges. This has a number of drawbacks. The charges levied on the vendor by the banks for credit card transactions are relatively high, typically 3%. Security of the credit card numbers is a problem, and there is therefore a reluctance of consumers to make such transactions. Other online funds transfer methods have been developed, such as electronic purses or wallets, but none of these have achieved wide acceptance due to a number of factors, including cumbersome procedures, unreasonable costs and unfair assignment of risk. Consumers require a high level of trust in such online transaction systems.
Consumers are accustomed to authorizing pre-approved payments to be deducted from a chequing account for many regular payments, such as mortgage and loan payments. Such transactions, which utilize the banking Automated Clearing-House (ACH) System, are relatively secure and inexpensive. Bank authorization of such payments typically requires only a voided cheque from the consumer's designated chequing account, and the consumer's signature, and the bank charge is simply a per transaction charge. Similarly banks will transfer funds into a bank account with minimum authorization and bank charges. Fraud is rarely a problem in these transactions given the nature of the parties involved in the transactions, and consumers have come to trust these procedures.
There is therefore a need for an online funds transfer system which avoids transmitting sensitive information over the Internet, and utilizes the security and simplicity of the ACH system, and the benefits of pre-approved payment and debit systems.